Global Capability Centres to lease around 60-62 mn sq ft of office space in 2023-25 across top six cities in India

Global Capability Centres to lease around 60-62 mn sq ft of office space in 2023-25 across top six cities in India

Global Capability Centres are likely to lease office space of around 60-62 mn sq. ft. of space between 2023-25. Sectors including technology, BFSI and engineering and manufacturing will lead leasing activity, while sectors such as life sciences, automobiles, and aviation will also expand their GCC operations in India, a report titled India’s Global Capability Centres- Charting a New Technology Era by CBRE South Asia Pvt Ltd showed.

The report also states that from 2023-25, the top six cities, including Delhi, Bengaluru, Mumbai, Chennai, Pune and Hyderabad, are likely to witness a strong pipeline of new developments in emerging micro markets, creating new hubs for activity. The upcoming developments would be geared towards quality investment-grade office supply, giving GCCs ample scope to upgrade and scale as they expand, it said.

Cementing the long-term intent of global corporates in India, GCCs are now leasing larger offices with the potential to scale up in the future. North American firms continue to be the mainstay of GCCs in India. Availability and cost of talent, real estate, and supporting regulatory framework aid GCCs expansion in India, the report said.

By 2025, it is estimated that there will be around 1900 total operational GCCs in the country from existing 1580. During this period, GCC leasing activity is expected to account for 35-40 percent of the overall office leasing. Globally, among the top emerging GCC hubs, including Brazil, Chile, China, Czech Republic, Hungary, Philippines, and Poland, India has the best cost and talent attractiveness score, which makes the country the most sought-after destination for GCCs.

During January to Jun 2023, GCCs continued aggressive expansion and accounted for a 38 percent share in overall office space take-up across six cities. Office leasing by GCCs in January to June 2023 period stood at 9.8 mn. sq. ft.  Bengaluru, Chennai, and Hyderabad - cumulatively accounted for over 77 percent of the total GCC leasing during the period.

Bengaluru continues to account for the largest share in leasing over the six months (Jan’23-Jun’23), while Chennai has witnessed about one-fourth share led by ready institutional supply that entered the market in 2023. For Bengaluru, GCC leasing during Jan-Jun’23 stood at 3.8 mn. sq. ft. GCC leasing quantum between Jan- Dec’22 and Jan-Jun’23 stood at 13 mn sq. ft., propelled by the tech sector that accounted for 46 percent share.

Over the past few years, the GCC landscape in the city has evolved from being overtly dominated by technology and BFSI firms, to now becoming more diversified (as well as niche and specialised) with firms from sectors such as retail, aerospace and life sciences expanding their footprint in the city, the report said.

During Jan-Jun’23, Chennai emerged as the second preferred GCC market after Bengaluru in India with, 2.4 mn. sq. ft. space take- up. Between Jan- Dec’22 and Jan-Jun’23, key micro markets for GCC leasing in Chennai were OMR Zone I and PT Road. GCC leasing quantum in the city, between Jan-Dec’22 and Jan-Jun’23 stood at 4 mn sq. ft. with a 39 percent share dominated by the E&M sector. The city has witnessed about a two-fold increase in GCC leasing in the Jan-Jun’23 period as compared to Jan-Jun’22.

Chennai is also an education hub, with a high presence of colleges and universities offering science, technology, engineering, and mathematics (STEM) courses, a key driver for attracting new GCC entrants into the city. The Tamil Nadu R&D Policy 2022, wherein entities such as GCCs and R&D centres are eligible for a range of incentives on electricity and stamp duty costs, is likely to auger well for global firms looking to set up their footprint in the city.

Hyderabad remains in the top three cities driving space absorption by GCCs during Jan-Jun’23. Leasing by GCCs during Jan-Jun’23 in the city stood at 1.4 mn. sq. ft. Between Jan- Dec’22 and Jan-Jun’23, key micro markets for GCC leasing were IT Corridor II and Extended IT Corridor.

GCC leasing quantum between Jan-Dec’22 and Jan-Jun’23 is 6 mn sq. ft. with a 35 percent share dominated by the tech sector companies. The growth of GCCs in the city comes in the backdrop of ample talent availability and an improving standard of living, comparatively lower costs, amidst proactive government initiatives. The city has witnessed GCC activity from across sectors such as technology, life sciences and consulting services.

Pune is emerging as a GCC hub, with a 57 percent increase in space take up in Jan-Jun’23 compared to Jan-Jun’22. GCC leasing quantum between Jan-Dec’22 and Jan-Jun’23 stood at 3 mn sq. ft. with 42 percent share dominated by the technology sector.

“India has emerged as the most preferred destination for GCCs worldwide, and the growth of GCCs in India is a testament to the country's skilled talent, cost efficiency, favourable business environment, and government support. Post the pandemic, global firms were nudged to re-evaluate their business offerings to increase digitisation levels. In a bid to ensure business agility, improve efficiency and make their businesses resilient, a higher number of MNCs explored multi-functional GCCs in India. Gradually, mid, and smaller-sized firms also started venturing into the Indian shores to enhance their offerings,” said Anshuman Magazine, Chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE.

Companies are also evaluating tier-II cities to set up their GCCs and expand their operations, encouraged by availability of talent due to the reverse migration observed during the pandemic, led by remote and hybrid working models. While cost arbitrage in tier-II cities has always been an advantage towards emerging hubs, the recent thrust on infrastructure development in these cities has also added to advantage of non-metro cities.

Going forward, the country’s maturing start-up industry, which has a symbiotic relationship with the GCC sector, is likely to see greater collaborations, fuelling the growth of the global centres’ innovation ecosystem, said the report.